Get Email Updates

The Dispatch E-Edition

All current subscribers have full access to Digital D, which includes the E-Edition and
unlimited premium content on Dispatch.com, BuckeyeXtra.com, BlueJacketsXtra.com and
DispatchPolitics.com.
Subscribe
today!

STOCKHOLM — One of three American economists who won the 2013 Nobel Memorial Prize in Economic
Sciences yesterday for research into market prices and asset bubbles expressed alarm at the rapid
rise in global housing prices.

Robert Shiller, who shared the $1.25 million prize with fellow laureates Eugene Fama and Lars
Peter Hansen, said the U.S. Federal Reserve’s economic stimulus and growing market speculation were
creating a “bubbly” property boom.

The Royal Swedish Academy of Sciences lauded the economists’ research on the prices of stocks,
bonds and other assets: “Mispricing of assets may contribute to financial crises and, as the recent
global recession illustrates, such crises can damage the overall economy.”

This was the case in the collapse of the U.S. housing market, which helped trigger the 2008-09
global financial crisis. Markets are at risk of committing the same error now, Shiller said after
learning he had won the Nobel Prize.

“This financial crisis that we’ve been going through in the last five years has been one that
seems to reveal the failure to understand price movements,” he said.

Shiller’s work led him to suggest in 2005 that the U.S. housing market might be overheating. He
helped create a closely watched gauge of housing prices, the S&P Case/Shiller Index.

The bubbling housing market is not mainly the result of central bank policy but reflects a shift
toward “a more speculative attitude,” Shiller said. “We cannot expect monetary policy to cure all
of these problems.”

The Royal Swedish Academy of Sciences said the laureates’ insights “provide guidance for the
development of theory as well as for professional investment practice.”

Fama, tipped as a Nobel winner for many years, has been called the father of modern finance and
is well-known for research showing certain groups of stocks tend to outperform over time, and for
thinking about markets as efficient.

With research spanning decades, the economists’ work helped the emergence of index funds in
stock markets.

Peter Englund, professor of banking at the Stockholm School of Economics and member of the prize
committee, said their research had deeply influenced modern finance.